So go read from Saturday’s the Trib’s report on what is going on between the state and the city over whether it will consider to accept a pledge of future tax revenue as an ‘asset’ on the pension funds books. Sorry, there will be a lot of apostrophes in all of this, it’s unavoidable.
The key issue at the moment seems to be whether or not said ‘transfer’ actually happened at all. The asset was a pledge of $735 million in tax revenue spread out over the next 31 years and presumably valued by its net present value in today’s dollars. The legal issue seems to be over whether any enforceable ‘transfer’ took place of those revenues. It is supposed to be an outright transfer.. as in the pension board all but ‘owns’ those revenues and there won’t be anything the city can do to stop those payments in the future. Irrevocable would be the term. That is about as simple as I can make it.
Hold the thought, but remember the’ irrevocable’ part.
The goal was to prevent the state from taking over the city’s pension system. One outcome of that was that if you looked at the state’s own actuarial report on the city’s pension system… if it were to be taken over the city’s minimum payment to keep the system solvent would ramp up to just under $160 million a year in 2030. Skip for the moment the basic issue that that might indeed be the level of payments the system requires.
So now presume for a moment that the state takes over and the city is now on the hook for those large new payments. Remember the ‘irrevocable’ asset? That is owned by the pension board and will not count against the required payments per the state’s report in the previous link. You see where this is going?
I speculate that the default outcome at the moment is that the city is not only going to be on the hook for the new payments to the state per the report in the previous link, but it has to make those after and on top of the revenues from the pledged ‘asset’. Both will be what hits the city books in a few years.
Is this an inevitability if the state takes over? If the pledged asset can be taken back, or if those revenues count against the city’s up front contribution requirements… then were they an asset of the pension board in the first place? It sure seems to me that city has painted itself into a corner. A very expensive corner.